Kstar’s third-quarter revenue misses Goldman Sachs forecasts, while data-center orders and margins remain supportive
Weak sales of new-energy products weighed on third-quarter results, but the data-center business grew 21%, and higher shares of high-power products and overseas revenue supported gross margin. The company expects data-center revenue to grow both year over year and quarter over quarter in the fourth quarter, while inventory buildup turned operating cash flow negative.
Original source：Goldman SachsFirst published on Unhidea：Original source date：
Key takeaway
Goldman Sachs maintains its Buy rating on Kstar, judging that data-center orders and product mix can support growth, while a slowdown in the new-energy business, cash tied up in inventory and the timing of new-technology adoption continue to affect the realization of results.
Why did revenue miss expectations in the third quarter while margins remained resilient?
Kstar reported third-quarter 2026 revenue of 1.578 billion yuan, up 9% year over year, and net profit of 211 million yuan, up 11%; the two figures were 6% and 11% below Goldman Sachs’ previous forecasts, respectively. Weak sales of new-energy products, together with a foreign-exchange loss of 13 million yuan, weighed on results.
Overall gross margin was approximately 30%, up 2 percentage points year over year but about 1 percentage point below Goldman Sachs’ forecast. Higher shares of high-power uninterruptible power supplies (UPS), commercial and industrial energy storage, and overseas revenue improved the product and geographic mix.
Goldman Sachs estimates that third-quarter data-center product revenue was 1.07 billion yuan, up 21% year over year, accounting for approximately 67% of company revenue and contributing more than 80% of net profit; new-energy business revenue was 513 million yuan, down 8% year over year.
Where is data-center order growth coming from?
The company said momentum in new orders began to accelerate around May 2026 and strengthened further from September to October. It expects data-center product revenue to grow both year over year and quarter over quarter in the fourth quarter.
AI data-center construction in Europe, the United States and Southeast Asia is driving overseas demand, and medium- and high-power products now account for about half of overseas data-center product sales. Despite pressure from exchange rates and raw-material costs, a higher share of high-power UPS products and overseas business has kept the segment’s gross margin at around 35%.
The company expects global electrical-equipment customers to place several new volume orders around the first quarter of 2027, after testing requirements are met. It has secured an order worth 60 million US dollars from an existing European customer and plans to use its Vietnam production capacity to expand direct shipments to North America in 2027.
The company also observed that, since mid-2026, as AI chip supply constraints eased, data-center construction activity by large Chinese cloud customers in China and Southeast Asia improved. It is optimistic about their construction demand in 2027–2028.
What do slower energy-storage growth and negative cash flow mean?
Goldman Sachs estimates that third-quarter energy-storage revenue was 341 million yuan, with year-over-year growth slowing to 3%, possibly related to intense competition in Europe faced by major contract-manufacturing customer SolarEdge and slower demand for residential energy storage. Commercial and industrial energy storage maintained rapid growth in Europe, Australia and South America.
Management maintained its guidance for 2026 energy-storage revenue of 1.5 billion yuan, up approximately 50% year over year. It expects full-year commercial and industrial energy-storage revenue to exceed residential energy-storage revenue and the segment’s gross margin to improve as the share of commercial and industrial products rises. Third-quarter photovoltaic inverter revenue was 153 million yuan, down 15% year over year, but its impact on overall net profit was relatively limited because the business has a low gross margin.
Third-quarter operating cash flow was a net outflow of 38 million yuan, compared with a net inflow of 357 million yuan a year earlier and a net inflow of 64 million yuan in the second quarter; the company increased its inventory of semiconductor components such as silicon carbide and high-power IGBT modules.
What are the timing considerations for new technology and Goldman Sachs’ growth outlook?
The company plans to conduct field tests of 800-volt DC products in Europe and Southeast Asia in November 2026, delayed from the previously planned October; the launch of a solid-state transformer prototype has been rescheduled to the first half of 2027. The company believes there are still no clear signs of near-term, large-scale industry adoption of either technology, and solid-state transformers also face raw-material and supply-chain readiness issues.
Goldman Sachs is positive on the expansion of overseas AI data-center customers, a recovery in domestic data-center demand and a recovery in overseas energy storage. It maintains its Buy rating and 12-month price target of 60 yuan. The bank’s main downside risks include weaker-than-expected growth in US contract-manufacturing orders, slower new-product launches, and overseas energy-storage growth and gross margins below expectations.
